As a result of a generous feed-in tariff (FiT), most solar PV installations in Central America in 2015 occurred in Honduras. The FiT, along with a new electricity law, has created major changes to the renewable energy sector in the country.
Honduras’s power sector is going through a period of transition. The power market has been controlled by state-owned utility Empresa Nacional de Energia Eléctrica (ENEE), which is responsible for all transmission and distribution. ENEE also generated 20% of the total 8.5TWh produced in 2015.
The Central American country approved a new electricity law that entered into force in July 2014, which will allow greater participation of private players in the power market. It also creates an independent regulatory agency, Comisión Reguladora de Energía (CREE). The new law was prompted by ENEE’s high level of debt (equivalent to 1.8% of the country’s $18.6bn GDP in 2013), late payments and power losses. The reform process is ongoing. Honduras is part of the Central American Electrical Interconnected System (SIEPAC) and is connected to El Salvador, Guatemala and Nicaragua by transmission lines. Honduras is a net importer in the regional market.
Decree 70, published in June 2007, is the main source of renewable energy incentives. It establishes a 10% price premium for clean energy projects in the first 15 years of operation. It also grants import, income and sales tax exemption to renewable energy generators. A feed-in tariff scheme offered contracts of $180/MWh for the first 300MW of PV commissioned before July 2015. Projects commissioned after that date received $150/MWh. In 2015, a total of 388MW of PV capacity was commissioned in the country, making it the second largest solar market in Latin America.
Honduras has a total installed capacity of 2.3GW. More than half (54%) of the electricity produced last year came from oil and diesel plants. Large hydro represented 17% of generation, while other renewables (biomass, small hydro, solar and wind) accounted for 27% of power production. In 2015, 2.3TWh were generated from renewable energy sources, which represents an increase of 51% compared with the previous year. In 2015, the national average retail electricity rate was 0.159/kWh, which was the lowest price since 2011.
Honduras also uses auctions to contract new power capacity. In 2010, ENEE held a clean energy-only tender, which contracted a total of 250MW of capacity from 39 hydro, biomass, cogeneration and geothermal projects.
Honduras scored 2.03 in Climatescope 2016, an increase of 0.53 on its 2015 tally. The country climbed six places up the list to rank 8th overall. Most notably, it took the number one spot globally on Clean Energy Investment and Climate Financing Parameter II.
The country’s score on Enabling Framework Parameter I was 1.85, substantially higher than its total the year before. It ranked 8th, reflecting the 965MW of clean energy capacity installed in 2015, and support from policies such as feed-in tariffs and power auctions.
Honduras was the top-rated country globally on Parameter II with a score of 2.60. It held onto the top spot for a second year running thanks, in part, to a substantial volume of local investment ($193m), plus $31m of loans and grants.
On Low-Carbon Business & Clean Energy Value Chains Parameter III, the country scored 1.35 and was placed 32nd, down five from the year before. Corporate activity was dominated by project developers and engineers.
On Greenhouse Gas Management Activities Parameter IV, Honduras’ score improved and it rose four places to 16th. Positive developments include the introduction of a GHG emissions reduction target.
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